Of Uganda’s coffee imaginary markets

Africa Kiiza

What you need to know:

Whereas Europe and American markets may be available for Uganda’s value added coffee, they are not accessible.

One of the provisions in the agreement between Uganda Vinci Coffee Company Limited (UVCCL) and the government is that the former will undertake coffee processing activities such as roasted, ground and instant coffee, coffee capsules and any other complementary products.

While the agreement does not compel UVCL to export the value added coffee, it is hoped that this will lead to export of value added coffee to “lucrative” markets in Europe, America and Middle East.

The narrative maintains that as a result, Uganda’s earnings from coffee will rise from $657.23 m recorded in 2021 to $5.4b per year.

While the theory behind this narrative is admirable, it appears the government does not either recognise or appreciate the reality in which such a theory is anchored.

Indeed, believing that there will be a market for Uganda’s value added coffee is akin to believing that Father Christmas is real! This is because these “lucrative markets” aggressively dominate and protect the higher chain of coffee which Uganda is attempting to enter.

Uganda’s major export destinations for green coffee beans are Italy, Germany, USA, Sudan and Spain.  While other export destinations include Kenya, Algeria, South Africa, Egypt and Morocco, Europe accounts for 75 percent of Uganda’s coffee exports.

We should understand the intentions behind Europe’s domination of green coffee beans imports from Uganda. Europe is home to the largest coffee roasting industry in the world. Indeed, Germany and Italy have the largest roasting industry followed by Spain, Netherlands, France and Sweden.

According to the 2021 Coffee Barometer conducted by Oxfam Belgium, leading toasters like Nestlé, JDE Peet’s End 2019, Lavazza, and Starbucks are responsible for roasting 35 percent of the world’s coffee. In 2019, both Nestlé and Starbucks reported sales worth $19.5 billion and $16 billion respectively. JDE Peet’s End 2019, a Germany owned roaster, launched in 2019 was able to sell $ 8.7b in the same year.

Furthermore, a coffee cartel is flourishing in Switzerland under the Swiss Coffee Trade Association (SCTA) and handles a volume of more than 50 per cent of global coffee exports. Members of  SCTA typically buy future coffee contracts from suppliers abroad and resell them to clients who are also abroad. Therefore, maintaining access to this important raw material to keep afloat coffee roasters, grounders and their over 343,815 cafes and 20,591 coffee-focused shops is essential for their survival, any outside value added coffee exports are shunned.

It is no surprise that Neumann Kaffee Gruppe, the world’s leading green coffee service group domiciled in Hamburg-Germany, with the help of state machinery, established the controversial Kaweri Coffee Plantation in Uganda in 2001, with the sole purpose of ensuring a stable supply of green coffee beans from Uganda.

Even initiatives like Fair Trade have focused on increasing farm prices for coffee farmers rather than value of coffee exports because the latter would interfere in the coffee empire and cartel.  Thus, whereas Europe and American markets may be available for Uganda’s value added coffee, they are not accessible. Market availability and market access are different.

However, not all is lost. There is a lot of untapped potential in the domestic, regional and continental markets. Nurturing a coffee drinking culture among Ugandans can for instance stimulate an increase in domestic consumption of the beverage. We can borrow lessons from Ethiopia which consumes more than 55 percent of its coffee domestically.

According to the International Coffee Organisation, per capita coffee consumption in Ethiopia in 2020 stood at 3kgs compared to Uganda which is below 1kg.  Strategies like BUBU should be used to promote consumption of local coffee brands rather than Nescafe which adorns majority coffee tables of Ugandan hotels.

The role of institutions like Uganda National Bureau of Statistics and  coffee cooperatives to ensure standards, awareness creation, branding and advertising cannot be overstated in this equation.

Mr Africa Kiiza is a PhD Fellow at Universität Hamburg